EU gas storage reaches November target early as Gazprom cuts flows

EU gas stocks smashed through the 80% storage target more than two months ahead on the back of persistently strong net injections despite dwindling Westward Russian gas flows.

EU gas stocks were above 84 Bcm Aug. 29, about 20% higher on the year, with gas tanks across the region now more than 80% full, according to GIE AGSI. The levels overtook an EU regulation adopted in the wake of Russia's invasion of Ukraine that calls for gas storage sites to be filled to at least 80% capacity by Nov. 1, 2022, and to 90% by Nov. 1, 2023.

Still, key markets have set stricter goals heading into the peak heating season, with Germany pushing for domestic tanks to be filled to 85% capacity by Oct. 1 and to 95% capacity by November.

It is a difficult period for fuel-starved European markets as Gazprom said Aug. 31 that gas flows through the Nord Stream pipeline to Germany had been fully suspended as scheduled for maintenance work to be carried out on the last operational turbine at the Portovaya compressor station.

EU gas tanks with a total capacity of approximately 105 Bcm could be brimming by October end if EU-wide net gas storage injections continue at the current rate, averaging above 395 million cu m/d for the period Aug. 1-29, according to GIE AGSI.

Gas tanks could still reach close to 90% fullness before November starts if net storage injections follow the five-year average of close to 153 million cu m/d for the period September-October 2017-2021.

Regardless, sustaining net injections at a high level could be challenging. There are no Russian gas flows expected through Poland for the first time this winter because of Russian sanctions on the owner of Poland's part of the Yamal-Europe gas pipeline, along with heavily impaired supplies through the Ukraine transit route.

Key factors to watch remain the level of Norwegian gas flows to the UK and Continental Europe, as well as LNG arrivals and any potential uptick in Russian gas flows through the Nord Stream pipeline after the ongoing maintenance.

Market concerns persist

Despite the storage optimism, Platts assessed the Dutch TTF Winter 2022 price at a whopping Eur266.025/MWh Aug. 30, after shedding Eur72.50/MWh during the trading session, according to data from S&P Global Commodity Insights.

"The market has reacted as expected to storages hitting 80%," an Austria-based trader said. "Prices had hit 330 euros but are now lower. A wild guess from me is that we see prices below 200 euros this month," adding that "we won't run out of gas."

"A slowing of storage injections contributes to the current drop [in prices]. However, the risk premium is too high for Q4 and should put pressure on prices," the Austria-based trader said.

"My immediate insight would be, that it is good news, but only a drop in the ocean if we have a cold winter, and Russian flows stay at these very low levels," a UK-based trader said.

"You just need to look at current prices to see that it is [storage injections] making almost no impact on pricing," he said. "People being relieved it's only around 260 euros shows how mental it is at the moment."

"Even if Germany fills up its storage to 100%, it's covering only two-three months demand, without Russian supply and in case of cold spells they can be in for trouble," said another European gas trader, adding that "there are signs for decreasing demand on the industry side due to high prices."